Sluggish Trade On Labor Day

WHERE WE STAND – Labor Day is never the most exciting of days to be at the desk, and so yesterday proved amid a dearth of fresh fundamental catalysts, seeing markets – by and large – tread water across the board.

As such, I’ll keep things relatively short this morning. As much as I might want to rant about how ECB President Lagarde has decided that it is now her job to close spreads, or the UK government’s nonsensical pledge to deliver ‘growth people can feel in their pockets’, it is only Tuesday, and hence a little early in the week to go into full ‘Meldrew mode’.

Of course, that does leave me rather scraping the barrel when it comes to this morning’s note, especially when a cursory glance at yesterday’s PnL across most major assets essentially reads ‘unch’. One must hope that the return of US desks today invigorates things a little, though I wouldn’t be at all surprised if conviction is somewhat lacking until we get past Friday’s US labour market report.

Precious metals, though, remain a notable exception to that, with spot gold having now printed fresh record highs, and spot silver breaking above $40/oz for the first time since 2011. At risk of repetition, the bull case for PMs is not only a convincing one, but also remains firmly intact, not only as upside inflation risks persist, but also as confidence in the USD/USTs continues to wane amid President Trump’s ongoing attacks on independent economic institutions such as the Fed. I’d not be expecting these gains to come to a halt any time soon, besides perhaps some profit taking around these new gold ATHs, though would be viewing any dips as buying opportunities.

Besides that, there’s little else worth mentioning this morning. My core views remain bullish equities, bearish USD, and leaning towards a further steepening of the Treasury curve. The end of the summer break, as well as the likely pick-up in volumes and improvement in liquidity, should see markets continue to take the path of least resistance in those directions for the time being.

LOOK AHEAD – As US desks start their holiday-shortened weeks, the data calendar becomes somewhat busier.

This morning, the latest ‘flash’ eurozone CPI figures are due, with headline inflation set to have held steady at the ECB’s 2% YoY price target in August, cementing expectations that Lagarde & Co will stand pat at next Thursday’s policy decision. In a similar vein, core CPI is seen dipping 0.1pp to 2.2%, which would be the slowest pace of core inflation since late-2021.

Stateside, today brings the release of August’s ISM manufacturing survey, with the headline index seen rising to 49.0, up from a prior 48.0. As well as the headline metric, the employment sub-index warrants close attention, particularly in terms of shaping expectations for Friday’s payrolls print, where consensus sees a jobs gain of +75k last month.